Opening address
by Ms. Danuta Hübner
United Nations Under-Secretary-General
Executive Secretary of the UN Economic Commission for Europe
At the World
Economic Forum
Session on Public-Private Partnerships for Transport Infrastructure
Salzburg, 3
July 2001
Ladies and Gentlemen,
Colleagues,
In 1990s, opportunities emerged to address more efficiently
massive needs of our region with regard to infrastructure development.
Public-Private Partnerships have become an important mechanism for responding to
the challenge of infrastructure development. As globalization has generated a
tremendous flow of private capital around the world, PPPs are a way of
harnessing these flows to provide higher quality and more varied services in
transport, energy, and telecommunications and in municipal services like water
and sanitation. Even though the transport sector is not as attractive to private
capital as other sectors because of the huge outlays in finance required for
transport projects, these challenges are being increasingly addressed and
solutions found so that the benefits arising from PPPs in roads, rails, ports
reach more and more citizens, even in the most challenging of investment
environments. Overall, it is not a question of public versus private but of a
partnership between the public and private sector which is required to meet the
transport infrastructure challenges.
This is particularly the case of countries with economies
in transition where infrastructure development cannot be financed through state
budgets due to the poor state syndrome.
There are certainly the huge opportunities that are now
present globally for PPPs, there are challenges which need to be addressed to
maximise the opportunities and there are already pragmatic responses involving
partnerships between the private sector and international community to make PPPs
work successfully.
Opportunities for
Public-Private Partnerships
Five years ago when the work to promote private finance in
infrastructure began in the UNECE, the concept of PPPs was not commonly used.
Now the concept is in the mainstream of development thinking and is voiced
regularly at the United Nations and in other international fora.
PPPs are not new, they existed already back in the 19th and early in the 20th century. It was the private sector rather than
the public sector which helped to build the heavy infrastructure of that time.
Today there is a very strong democratic demand which is reflected in the need to
ensure that infrastructure services cover more areas, provide access to more
people and achieve more objectives. Amongst the most pressing goals are:
- environmental sustainability: user charges on access to roads, energy and
water, the commercialisation of providers of such services and partnership with
private firms have helped to preserve the environment and even to surpass
minimum environmental standards;
- higher quality and better services: not just minimum services but rather
high quality, speedy services delivered by well managed private providers that
offer value-for-money
- involvement of the local communities in consultation on and planning of
projects to ensure their social acceptability and engaging citizens and civic
groups in the governance and the monitoring;
- guaranteeing social equity, poverty alleviation and inclusiveness that
is, providing services which respond to the needs of all citizens, not just the
wealthy strata of societies;
- expanding services provided by the private sector to new services such as
health and education.
These guiding principles of PPPs now – universal service,
social equity, environmental sustainability, social acceptability, and new
services – are only achievable by partnership between a strong state and
strong private sector.
On the private sector side, there is also an increasing
understanding that beyond the shareholders, - it has wider obligations to all
stakeholders of the development process. So my message is that we are seeing
today a new approach, a new culture or PPPs.
It is also reflected in global initiatives such as:
- The United Nations Global Compact;
- The UN Millennium Summit where all the world’s countries made
commitment to poverty alleviation and called on public-private partnership to
help to achieve this objective;
- Rio +10 process – leading to World Summit on Sustainable Development in
Johannesburg next year. In this global movement to promote sustainable
development PPPs are recognized in energy and transport as imperative for
ensuring that environment and social development are not ignored.
Indeed, in different regions of the world there is a move
to improve the environment for PPPs. Real progress is being made.
In Asia, the end of the financial crisis has allowed
governments to reassess their infrastructure priorities and in Korea in November
UNESCAP will launch a new initiative on PPPs. Many cities in Asia have been
transformed by private financed schemes involving concession to private
operators. In Bangkok, to give just one example, with a population in excess of
ten million people, the privately funded express highway and the sky train have
made the city for the first time manageable for visitors and local inhabitants.
In Latin America, democratisation and the demand for
services allied with the strength of the US economy have provided new
opportunities of investment in PPPs especially in transport.
In Europe, the tremendous progress in economic integration
is leading to a renewed emphasis on ways and means of financing the energy
supplies, the new transport corridors, border crossings, ports.
Challenges which need to be addressed
Notwithstanding the enormous progress in private provision
of services around the world, it has been difficult to implement PPPs in
transport. With regard to economies in transition, where needs for
infrastructure development are massive, there has been not much understanding of
the need to involve the private sector in the infrastructure. Governments were
not prepared, trade union and construction companies felt threatened by new
private providers in the transport sector. Environmentalists were not helpful
and also raised objections. When targets were met in terms of delivery, public
authority was also criticised for failure to be involved in the management and
monitoring of some projects. Indeed, early in the transition fully private roads
were criticised as being beyond the financial means of most road users in
countries which were only just recovering from the early economic shock of
transition.
Clearly, expectations were too high. The returns being
asked by the private sector were also inflated. Certainly, now ten years on, the
risk factor has fallen dramatically and no longer can it justify the disparity
between the returns being asked for in eastern Europe and those in western
countries.
Lessons have, however, been learned and the implementation
of this new agenda in transport is moving ahead.
First, better understanding on the government side that the
state needs to help with more open approach to guarantee and subsidy if the
private sector is to develop transport projects.
Secondly, governments and the private sector are building
transport projects on much more realistic commercial criteria.
Thirdly, the private sector brings its new technologies and
state of art materials to protect fragile ecosystems. Many cities in Europe have
been transformed by new environmentally sustainable transport systems provided
by private financing.
Fourthly, private providers are also helping to make
transport services accessible to the poor and disadvantaged. In many of the
world’s poorest countries, private providers to rural areas are providing
transport systems and the urban poor are able to take advantage of mass transit
metropolitan schemes. This is often being done by the use of subsidies by
governments to provide incentives to private companies to make sure that such
social targets are met.
Fifthly, governments are not aware of the need to promote a
consensus between the unions and management, social partners and local firms so
that PPPs do not go forward in a sea of criticism and dispute as happened
sometimes in the past. The new legislation on PPPs in Ireland for example,
drafted by the transport authorities, is based on special social agreements
signed by trade unions and the construction industry which will prevent
conflicts occurring after the project has begun operation. Such agreements are
critically important in building social partnership and industrial peace.
Of course, private sector solutions are not right for every
nation but what is clear and undeniable is that the private sector has the
creative energy and imagination to find ways of overcoming the most difficult of
problems. The flexible financing and contractual schemes for example that the
private sector can employ make projects in relatively poor areas by cash
strapped countries now feasible.
Nevertheless, more guarantees and more actions at the
international level are required in order to make PPPs an even bigger reality in
the transport sector. One of the major challenges is developing PPPS in
southeast Europe where the private sector and the commercial banks continue to
be reluctant to invest. While in the trade facilitation field there has been a
series of new instruments, in PPPs in contrast, there is nothing similar in this
subregion.
One proposal could be to mobilise the export credit
agencies from donor and commercial risks that can encourage lending by the
international commercial banks. The EBRD has done much to promote private
financing and PPPs and will certainly be looking carefully at new proposals to
give more incentives to commercial banks to provide funds for transport
infrastructure in the Balkans.
Pragmatic response
There have been some pragmatic responses to the challenge
of PPPs in transport infrastructure.
The UNECE has a long history in developing the conventions
for integrated transport systems across Europe. More than 50 European agreements
have been negotiated in this regard. These frameworks are essential for economic
development and trade; but the financing of new corridors and integrated
transport systems remains a challenge. To this end the UNECE established an
expert group called the BOT Group to raise awareness of best practices on
private finance initiatives. In December 2000, the UNECE launched a
Public-Private Partnership Alliance – to promote private funding in
infrastructure, bringing together companies and governments to implement
projects based on the principles and criteria mentioned above.
This Alliance will provide assistance to governments and to
the private sector to improve the procedures, instructions and capacity to
negotiate deals in their interest. It will help the private sector to meet
government decision takes and to develop viable projects more quickly.
The PPP Alliance is working with the Stability Pact for
South East Europe under the Investment Compact initiative. Under this programme
we will hold a workshop in Slovenia on the legal instruments for successful
consession financing. In the context meeting of the Working Table II in
Bucharest in October 2001, we will present a special seminar on cases of
successful PPPs around the world and how they can be adapted in southeast
Europe.
The advisory work is also being supplemented by efforts to
encourage the acceleration of PPPs by governments. Our group of experts is
making efforts to overcome one of the major challenges – the difficulties
governments have in presenting bankable projects. Accordingly, our UN panel of
experts will invite from our member States some project proposals from which a
few pilot projects will be selected into the market place.
In conclusion, there are huge opportunities for PPPs, this
is a time where the international community is making renewed efforts to help
the process and bring in the private sector. On behalf of the UNECE I would like
to invite you to join us and to help transfer your knowledge and skills to our
countries in Central and Eastern Europe.
Thank you for your attention.